Tax Tips for Non-resident Landlords

Tax season can be a huge headache for a lot of people, particularly, for non-resident landlords. If you own rental property in Canada and are currently living abroad, take a moment to read this article and gain a better understanding of your options regarding rental income tax.

In this article, we will go over the basics of an NR6 and the importance of filing a Section 216.

As a rental property owner and a non-resident, the easiest way to comply with Canadian tax law related to your rental income is to remit 25% of gross rent to CRA every month. When 25% of gross rent is remitted, CRA allows you 2 years to file a tax return. If you fail to file within the 2 years, since you’ve already remitted 25% of your gross revenue, CRA automatically assumes you have fulfilled your tax obligation and no further action is required. For many, remitting 25% of gross rent is a sum they are not comfortable parting with. A second option, which allows you to avoid remitting 25% of gross revenue is available by filing an NR6 using an NR6 form.

The NR6 is used to project an estimate of the net revenue associated with an investment property. Once completed (filed & accepted by CRA), CRA allows you to remit 25% of net revenues (income minus expenses). When an NR6 is filed, a Section 216 must be filed by June 30th of the following year. The Section 216 filing is simply a form of income tax filing for non-residents which considers the NR6 income predictions.

If you fail to file your Section 216 on time or use the incorrect form, CRA will charge both your guarantor and you (the property owner & non-resident) a penalty plus interest. A Section 216 must be filed to close off an NR6, without exception.

The Section 216 reports on rental income received during an active NR6. For example, if an NR6 was active for all 12 months of the year, then the Section 216 would be reporting on all 12 months. If the NR6 was cancelled mid-way through the year, then the Section 216 would be reporting on rental income for the active period only. If you are still collecting rental income after the NR6 has been cancelled, the remaining months of the year will be reported on a T1 General. Failure to file a Section 216 on time will result in CRA issuing a penalty in the amount of 25% of the gross revenue during the active NR6 period.

This is the reason we actively and persistently work with our clients to ensure not only their tax return is filed, but specifically, a Section 216 is filed.

• If you collect rent in Canada and live in any other country, you will be taxed as a non-resident.
• Non-resident landlords must either:
  • Remit 25% of rental income to CRA
  • Or file a Section 216 and remit 25% of rental income – expenses
• Failure to file your NR6 and Section 216 correctly and on time will result in financial penalties
• The deadline to file your Section 216 is June 30th.
• If sent via registered mail or by courier, get confirmation of when it was sent and received.
• If you fax it in, retain a fax confirmation sheet.